Why Lithium Will Dominate the New Decade

By Brian Hicks | Wednesday, January 6th, 2010
From: Wealth Daily _ Independant INvestment Analasys and Commentary

It's been about four and a half months since I first laid out my thesis for a lithium bull market.
My play at the time was a tiny company with lithium properties in Nevada called Western Lithium (WLC). At the time of my report, the stock was trading for just $1 a share.

Take a look at the stock's performance since my recommendation:

As of this writing, Western Lithium has traded as high as $1.88. If you purchased Western Lithium off of my recommendation, you're sitting on at least an +80% gain. You've nearly doubled your money inside of nine months. But listen to me... I wouldn't sell just yet... I think this baby has legs.

So what's going on here?

Well in a nutshell, fear and greed.

You see, lithium is used in everything from batteries for your laptop computer to the battery in your watch.

But its use in the electric car market is what has lithium producers flying high... and users of lithium hoarding it.

But there's more to this story... and the reason why I think lithium — as well as a group of unique metals — could be in a bull market for years to come.

On January 2nd of this year, UK's The Independent ran an article entitled "Concern as China clamps down on rare earth exports."

According to the piece:

Britain and other Western countries risk running out of supplies of certain highly sought-after rare metals that are vital to a host of green technologies, amid growing evidence that China, which has a monopoly on global production, is set to choke off exports of valuable compounds.

Failure to secure alternative long-term sources of rare earth elements (REEs) would affect the manufacturing and development of low-carbon technology, which relies on the unique properties of the 17 metals to mass-produce eco-friendly innovations such as wind turbines and low-energy light bulbs.

China, whose mines account for 97 per cent of global supplies, is trying to ensure that all raw REE materials are processed within its borders. During the past seven years it has reduced by 40 per cent the amount of rare earths available for export.

Industry sources have told The Independent that China could halt shipments of at least two metals as early as next year, and that by 2012 it is likely to be producing only enough REE ore to satisfy its own booming domestic demand, creating a potential crisis as Western countries rush to find alternative supplies, and companies open new mines in locations from South Africa to Greenland to satisfy international demand.

Jack Lifton, an independent consultant and a world expert on REEs, said: "A real crunch is coming. In America, Britain and elsewhere we have not yet woken up to the fact that there is an urgent need to secure the supply of rare earths from sources outside China. China has gone from exporting 75 per cent of the raw ore it produces to shipping just 25 per cent, and it does not consider itself to be under any obligation to ensure supplies of rare earths to anyone but itself. There has been an effort in the West to set up new mines but these are five to 10 years away from significant production."

Understand this: If the United States can't get a stable and robust supply of rare earth elements, America's green energy sector is dead. Kaput. Done.

There's no two ways about it.

Now, technically lithium isn't a rare earth metal. But it's highly prized as if it were a rare earth metal because it's a vital commodity for the emerging green energy sector.

And let me be very clear about this: In the years to come, you will hear about "rare earths" as much as you hear about oil or gasoline. That's how important these elements will be to industrialized economies.

What are the rare earth elements and how are they used?

First discovered in the 18th century, rare earth metals were long-considered chemical curiosities rather than the vital building blocks for technology.

After their discovery by a Swedish scientist in 1787, a total of 17 of the soft metals were identified. Despite their name, they are relatively abundant in the Earth's crust, however high extraction cost means only areas with rich deposits — China, in particular — are worth exploiting.

The arrival of new technology means that global production has risen from less than 5,000 tonnes in 1955 to the current level of about 120,000 tonnes a year.

Take a look at the chart below. It should give you an idea of those considered rare earth elements and their use in modern technology:

I have highlighted two ways to play the emerging rare earth market: 1) Western Lithium; and 2) Argentex.

Argentex (AGXM) will be mining indium. Like lithium, indium isn't technically a rare earth. But again, it is highly sought-after because indium is used in the manufacturing of solar panels.
Argentex is up nearly 500% since my recommendation. But at just $0.77 a share... I expect it to go much, much higher.

In a decade sure to be marked by new (and improved, more efficient) technology, rare earth metals will become a linchpin — all the while lining the pockets of savvy investors. But you've got to stay on the pulse of things. As you know by now, the media doesn't always report on these stories as they're happening...
And that's where we can help.

Just five days ago, on New Year's Day, the Kingdom of Denmark relinquished its sovereign hold over Greenland's mineral rights. A single company is now the sole possessor of this 500-square-mile hunk of Arctic bedrock. And this land is the most precious 500 square miles on the planet.

Because locked within this property is a rare earth metals deposit concentrated unlike any other deposit on earth. Remember the chart I showed you earlier? Cerium, promethium, europium... these elements and more are all found in this Greenland deposit.

Our new report reveals the one company that now calls this precious land its own... and how you can get in at the very start of what will be a great run for rare earth metals.
Next week, I will release my 2010 Market Outlook, "Peak America." Be on the lookout for it.

Profitably yours,

Brian Hicks